So what about the environment?
Sure, Crypto Mining has meant that more computers are churning through more electricity, and inadvertently producing more C02;however let’s put some things into perspective. Gold mining has accounted for over 50,000 deaths in the last 100 years. To date 0 people have died in a bitcoin mine.
This was a really difficult thing to research – because every calculation is done differently, uses different terminology, and were various levels of intentionally misleading. I’ll do my best to break it down.
According to the bitcoin energy consumption index – the bitcoin network consumes roughly 56 Terra-watt hours per year. So lets break that down to get a bitcoin block (6 blocks an hour, 144 p/day, 52,560 p/year) so that gives us roughly 1.065 Gigawatt hours per BLOCK – currently 12.5 bitcoins are being created per block so 85 Megawatt hours per Bitcoin. Using the blueskymodel calculations for energy to carbon production – According to estimates 8,500 pounds of carbon per bitcoin.
Unit of measure: 1 Bitcoin
Cost per Unit: 9,042 USD
Energy p/unit: 85MWhr
C02 per Unit: 3.7 Tonns
Unit of measure: 1 Kg Gold
Cost per Unit: 46,244 USD
Energy per Unit: 48.611
C02 per Unit: 20 Tonns
Human cost: 13 Deaths USA, 85 Deaths South Africa
Environmental cost: 300 kL water consumed, 150kg Cyanide, 1,500 Tons of waste rock
And you may say “but Luke, once you’ve dug up the Gold… its done, there’s no more carbon!!!” Ok lets that as true (and ignore, smelting, transporting and the cost of re-using that gold to turn it into something other than a bar). The same holds true for bitcoin – once mined, it no longer produces additional carbon “BUT NO!” you scream, “WHAT ABOUT WHEN YOU TRANSFER IT!” Slamming your fist on the table. Unfortunately not, as all subsequent emissions are factored in with newly minted bitcoins… Basically you can’t double dip on allocation of carbon to multiple bitcoins – when a bitcoin is minted, it is responsible for the amount of carbon that was used to verify the block of transactions it was created from, meaning that when bitcoin A is mined, it is assigned x carbon, so if bitcoin A is transferred immediately from whoever mined it to someone else, it will appear in the next block of transactions and bitcoin B is minted, taking up all the carbon responsibility for that block, and so on and so forth.
So this first example of mining is called Proof of work – its value is derived (aside from speculation) from the fact that there are millions of computers around the world churning out hash’s in attempt to solve blocks of transactions – which requires hardware to be purchased and more importantly, electricity to be consumed. The biggest issue with proof of work is the constant electricity cost to power the network – and the more entrants that join the mining game, the higher the electricity cost to mine a bitcoin, which is why there are other methods being proposed to ‘mine’ future blockchains.
Proof of Stake
Proof of stake is looking to be the second most common method of achieving distributed consensus. The goal is the same as proof of work, however it comes with a number of advantages and disadvantages…
In a proof of stake system – all tokens are premined meaning the only way to acquire more is to purchase them at market or by participating in airdrops or other incentives that have been implemented by the host cryptocurrency. Blocks are validated by ‘forgers’ / ‘Validator’ or ‘Staker’ (similar terms to describe the same role) this is the PoS version of a miner – in a similar fashion to Proof of work, a group of transactions are selected <Insert method>. In most cases, forgers are rewarded via the transfer fees from the blocks that they have created, rather than the inflation of the cryptocurrency supply.
To become a forger, i don’t need to buy a heap of mining equipment and pay thousands of dollars a year in electricity fees – i do however need to ‘stake’ my tokens in escrow in the network. The ‘node’ im using to forge blocks must follow a strict protocol to validate transactions. If I alter the protocol for my own gain (or just because i want to) I risk losing my entire ‘stake’ of coins. Making it possible, but unprofitable to try and maliciously approve blocks.
So for example – if i’ve changed my node’s authorisation protocol somehow, i may allow transactions that do not have a valid signature, or are transfers from wallets with insufficient funds to make the transfer, I may forge a block that will allow those transactions into the blockchain, however inevitably the system will find the issue, take the stake of the forger and correct the transactions.
I will note that there are actually multiple ways that Proof of stake can be managed, and each proof of stake network tends to have its own differences (some are identical) so this is a broad brush approach to the topic.
So proof of stake is less power intensive, harder to 51% attack, and significantly more scalable than Proof of work, however it is not without its drawbacks. PoS is less trustless than PoW, even if the chance of invalid transactions making it onto the network is infinitely small, it is not 0. Proof of Stake can also place minimum staking amounts, or require users to stake a significant amount of coins to buy a ‘masternode’ – for example Ethereum is pegging its masternode at btw 1250 – 1500 eth which eliminates the ability for the vast majority of users from ever being able to participate.
The biggest problem with PoS is that it tends to centralize voting for protocol changes as larger stake holders (larger wallets) vote for more and more changes that centralize their power over time… thus leaving them less and less participatory over time. This is contradictory to how most people want to think of Crypto – as a level playing field that anyone can “mine” and participate in the upside of.
So when we break all this down, we can start to see how how the blockchain/cryptocurrency communities are working at better ways to ensure the continual survival of the industry. By constantly updating and evolving the way things are being done – which is how most businesses survive in the modern landscape – we can ensure that many of the faults of the industry which are widely criticised by the media are eliminated, and the problems they create are solved.